Spending $20,000 for air travel over the next five years may seem like a lot of money to some, but it won't even cover routine trips for others.
It's not likely to cover the trips taken by David L. Paul, for instance, the first customer for American Airlines' unusual new air-travel pass program. The new fare plan offers passes to frequent travelers for varying amounts of travel on American flights for fixed terms ranging from five years to a "lifetime."
Paul, chairman and chief executive officer of the Westport Co., a Connecticut-based real estate investment trust, shelled out $19,900 last month for an "AAirpass" good for 25,000 miles of coach travel on American flights each year for the next five years.
"We believe, over the long run, that we'll save money," Paul said in a telephone interview from Chicago. Paul estimates that he flies between 100,000 and 150,000 miles a year commuting from his home in New York to Chicago for three days each week. His activities there include overseeing the conversion of the huge Furniture Mart on Lakeshore Drive from a manufacturers' exhibition hall into a multipurpose condominium, shopping center and office building complex.
"Assuming that the cost of my money is worth 20 percent, and assuming that airline fares will go up 10 percent a year, we believe we will break even or recoup our investment in 2, 2 1/2 years," Paul said. "The rest will be our return on having laid our money out in advance."
Under the plan, Paul has the opportunity within six months to extend the term of his pass or to add to its mileage limits in 5,000-mile increments--something Paul well might do if he keeps up his current schedule. If he continues to fly on American each week to and from Chicago, he will use up his annual 25,000 miles in 17 weeks.
American is hoping about 20,000 customers like Paul will be lured to its new fare plan, which offers passes for air travel starting at $8,000, a price that buys travelers 65 years of age and older a five-year pass allowing 12,500 miles of coach travel a year.
The most expensive pass entitles its holder to a lifetime of unlimited travel in first class or coach for $250,000. Asked at a news conference what kind of person would spend a quarter of a million dollars for an air pass, American President Robert L. Crandall replied, "a rich one."
American estimates that more than 70,000 of its customers--primarily business people, athletes and entertainers--"easily" fly 25,000 miles a year. If the Dallas-based airline finds 20,000 customers for its passes, those passengers could generate up to $500 million in revenues, Crandall said. If the fare plan fails, American will write it off as a bad idea, he added.
The program obviously struck a chord in Paul. "I think the airline industry should be more sensitive to their regular, frequent travelers," he said, citing various "discount" programs for vacationers. "At least this program recognizes frequent travelers and gives us some benefits that have not been given before."
Included as amenities for pass holders are free cocktails and entertainment headsets in flight, use of a special 24-hour reservations hot-line number, a simplified write-your-own-ticket system, use of first-class check-in desks at airports and complimentary membership in American's Admirals Club.
So far, the passes will be good only on American's domestic routes, but if foreign governments give their approval, they could be used on American flights to Canada, Mexico and the Caribbean.